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Individual Life Insurance 

Personal life insurance is an essential part of every financial plan as a risk management tool and an investment, whether you are single, just married, a new parent, enjoying middle age, or rocking retirement. 

Many people recognize that they need personal life insurance, but don't know where to start. We're here to make individual life insurance easier to understand. You'll learn what life insurance is, the benefits of life insurance, and how life insurance works. 

Keller-Brown's Life Insurance Specialists are standing by to answer any additional questions you may have.  

What is Life Insurance?

Because it's not mandatory like auto insurance or mortgage insurance, a lot of people don't have a real understanding of what life insurance is and how life insurance works. The questions we hear most often at Keller-Brown from our Pennsylvania and Maryland customers include "What's life insurance?", "What's the purpose of life insurance?", and "Do I even need life insurance?"  

Simply put, life insurance is an insurance policy that pays out a predetermined amount of money to the recipients of your choice at the time of your death. Sometimes known as personal life insurance or individual life insurance, a life insurance policy can provide financial support to your loved ones at a time when they need it most. You'll learn more about the different types of life insurance policies called term, whole, or universal below. 

If you have a spouse, children, or anyone who depends on your income, an individual life insurance policy acts as a safety net for them if you die. 

Perhaps you don't think you need personal life insurance because you are the stay-at-home parent to your children. The services you provide—from childcare to chauffeuring, meal preparation, house cleaning, and a million other everyday tasks—are all items that would have to be paid for if you were no longer around. A recent study by Salary.com estimated that stay-at-home parents were worth $178,000 a year.  

Even if you are single with no one depending on your income, personal life insurance is a smart money move because the benefits of life insurance can cover the costs of a funeral or other final expenses without burdening your loved ones.

Before we get into all the benefits of individual life insurance, let's explore some of the myths you may have heard.

1. You can't buy life insurance if you're over a certain age. Not true! Life insurance can be purchased at any age.
2. Life insurance is only for healthy people. False! Most people are eligible for life insurance, including those with preexisting conditions.
3. If you have insurance through your workplace, that's all you need. That's not usually the case. Life insurance received through a workplace is often for a nominal amount intended only to cover funeral expenses.
4. If I get sick my life insurance policy will get canceled. It is illegal for an insurance company to cancel a life insurance policy because the policyholder's health changed.

   And perhaps the biggest and most popular myth:

5. Life insurance is not affordable. You may be surprised to find out how reasonably priced life insurance can be. According to the Insurance Information Institute, "Americans consistently overestimate the cost of term life coverage. Half the population estimates the cost of life insurance at more than three times the actual cost."

Benefits of Life Insurance

It has been said that life insurance is one of the greatest gifts you can give your family because it can take care of your loved ones when you no longer can.

One of the primary benefits of a life insurance policy is that it replaces income that is lost from the family when the policyholder passes. The payout can be used to pay off everyday expenses like childcare, car loans, credit cards, doctor visits, and utilities. 

Many policyholders choose a payout amount that will pay off a mortgage and fund school tuitions for their children at a trade school or college. Another benefit of life insurance is payouts are typically tax-free, so your beneficiaries will not have to worry about inheritance tax.

Personal life insurance can also save your heirs from having to pay off any outstanding debts that are not discharged due to death. According to the Federal Trade Commission, there are certain debts that are owed by and paid for from the deceased person's estate. 

For example, if you and your spouse co-signed on a car loan, your spouse is still obligated to pay off the loan. Or, if you have student debt from a private school, the school is legally allowed to collect the outstanding loan from your estate.

Perhaps you are a partner in a business that would be at risk of closing if you died. In that case, there is something known as a key person insurance policy in which your business partner becomes your beneficiary. 

Payouts from individual life insurance could be used to fund a buy-sell agreement so the surviving partner could buy out your heirs. You would also want your partners to have a key person insurance policy designating you as the beneficiary.

For most individual life insurance policyholders, the biggest benefit is the peace of mind that comes from knowing their loved ones will be taken care of if the unthinkable happens.

How Life Insurance Works

Life insurance works like most insurance policies you already have. That is, you pay a specific amount each month to the insurance company in exchange for monetary benefit. For personal life insurance, benefits are paid upon the policyholder's death. 

If the policyholder dies while the insurance policy is active, the recipients the policyholder has chosen—known as beneficiaries—will receive what is called a death benefit. This is tax-free money that the recipient can use in whatever way they wish.

Maryland and Pennsylvania residents have three types of individual life insurance from which to choose: term life insurance, whole life insurance (also called permanent life insurance), and universal life insurance.

• Term life insuranceis purchased for a set period of time from one year to 30 years. Because term life insurance lasts for a specific time frame and the death benefit is its only cash value, this type of insurance policy can be the least expensive option. 

Many policyholders buy term life insurance until they are a specific age, say 65, or their children are grown and their mortgage paid off.

• Permanent life insurance lasts for the lifetime of the policyholder. This includes an investment component that can be withdrawn or borrowed from.

• Universal life insurance is permanent life insurance that combines term insurance with a cash account that earns tax-deferred interest.

Your Keller-Brown Life Insurance Specialist can answer any questions you may have about these three types of life insurance and help you determine the right policy for you and your family. In fact, you can estimate your life insurance needs right now using this life insurance calculator.

If you already have an individual life insurance policy in place, we can review it with you to make sure it meets your needs today. The National Association of Insurance Commissioners, which regulates the insurance industry, advises policyholders to review their life insurance policy on a regular basis. 

"If you have a policy, it's important to review it with your agent every few years to keep up with changes in your family status, income, and needs."

Do you have questions about Individual Life Insurance?

Contact an insurance agent at Keller-Brown Insurance Services today to answer any questions about Individual Life Insurance or for a free review and insurance quote for Individual Life Insurance. And don't forget, as an independent insurance agency, we represent several top rated insurance companies. We have the flexibility to help you find coverage at competitive premiums for business, home, auto, and more.